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FINANCIAL CRISIS VETERAN CAUTIONS CHINAIn a new book, Henry M. Paulson, the Treasury secretary and chief firefighter during the 2008 financial crisis, warns that China’s financial system will undoubtedly have to "face a reckoning and have to contend with a wave of credit losses and debt restructurings." It is a remarkably cautionary message from the former chief executive of Goldman Sachs, writes Andrew Ross Sorkin in the DealBook column, given Mr. Paulson’s deep and long-established ties with the senior leadership of China.

Mr. Paulson’s book, "Dealing With China: An Insider Unmasks the New Economic Superpower" - which The Financial Times review this weekend called"a must-read for anyone who deals with China and possesses an aircraft carrier or two" – does emphasize that Chinese officials have the ability to avert a crisis. "But Mr. Paulson’s anxieties about China have an unnerving similarity to the financial crisis in the United States, and his warnings demand attention," Mr. Sorkin writes.

What would be the trigger for a crisis in China? Mr. Paulson identifies an eerily familiar culprit: a bursting of a real estate bubble. He is also worried about the rising level of debt as a percentage of China’s gross domestic product and the shadowy and risky lending by China’s trust companies.

KAISA DEFAULT SHOWS CHINA’S RISKSMr. Paulson’s warning seems especially timely amid the news that the Chinese real estate developer Kaisa Group has defaulted on two large interest payments due last month on about billion in United States dollar-denominated debt. The troubles of the company are now "a case study for the risks of investing in China," writes David Barboza in DealBook.

Investors from around the world, searching for yield, poured money into Kaisa. The company sold .5 billion in bonds to mutual funds and other major money managers. Then a slump in property prices and a widening anti-corruption inquiry knocked the legs out from under Kaisa and other developers. Kaisa is seeking to restructure its more than .4 billion in debt.

With the default – the first ever on dollar debt by a Chinese developer - the question is whether others will soon be next. "More than one big developer is going to go under," Erik Gordon, a professor at the University of Michigan told Bloomberg News. "Busts follow booms. There’s no reason for it to be any different in China."